November 09, 2010

Spending, Borrowing and Tax Cuts

As of course everyone is aware by now, many of the "Tea Party" candidates were elected to office last week, and many Republican officials have taken the resurgence of the party as an indication of support for what they view as the advocacy group's platform (shaped, in significant part, by funding from Dick Armey's group and the Koch brothers' agenda).

The result is that there is more talk about how to strangle "big government" while at the same time providing tax cuts to as many as possible. So Senator Elect Mike Lee of Utah, who won with Tea Party support, refuses to say what programs carried out by the federal government he thinks are bad, other than agreeing when PBS's Woodruff mentioned others' attacks on the federal Department of Education that we could get rid of that since (to paraphrase) education should be a matter for states and local governments. See the video of Woodruff's interview with Sen. elect Lee at the PBS website: Tea Party Sen.-Elect Vows Vote Against More Debt

One suspects that the reason education is easy to attack is that the Republicans-- since the Department's creation --have been attacking it, never with much specifics but always insisting that the problem is that it takes control away from local school districts. But what kinds of things does the Department do that are so bad? Looking at its website today, one finds several interesting items.

"Ready-to-learn" TV Grants--The department provided $27 million in three five-year grant awards to telecommunications entities-- Window to the World Communications, the Corporation for Public Broadcasting and the Hispanic Information and Telecommunications Network-- to support projects that "improve educational opportunities for young learners through innovative technology". The grant recipients will develop outreach materials and resources for families, preschool and early elementary teachers intended to improve literacy and math skills in children from 2 to 8 years old.

Federal student aid--The Department provides information and tools to help students find grants, student loans and scholarships, and to assist student counselors in helping students navigate the aid network. See, e.g., the portal for "Student Aid on the Web". How many students are able to attend college because of federal student aid who otherwise would not be able to go? In what way could states provide the same type of benefit, when students may well leave their own state to go elsewhere and states already are hard pressed to fund their own public universities (leaving most of them to scrounge for donor aid for 70% or more of their funding)?

Those are just a skim of the surface of the kinds of activities the Department undertakes. Yet Sen. Elect Mike Lee of Utah thinks we could just eliminate it. Wonder what real deliberation and investigation, if any, he is basing his opinion on.....

Lee also says that the government should make "across the board" cuts of up to 40% in order to prevent any further borrowing. He would like to cut federal salaries by 10% and fire federal workers. And he has indicated his willingness to join the renegade band of Republicans that have indicated they will not vote to increase the debt ceiling. These programs alone would likely launch us back into the Great Recession or in fact into a Great Depression. When citizen spending has stopped, government spending is what keeps the economy rolling. Especially beneficial is government spending that creates infrastructure that will support future job growth. But the kinds of cutbacks--and immediate limitation on borrowing--proposed here would be nothing short of disastrous.

Especially with the simultaneous push by Republicans to extend all of the Bush tax cuts, even to those wealthiest individuals who mostly save them (and invest them abroad) so that failing to extend new cuts to them will make not a whit of difference to the economy. Senator Orrin Hatch (Lee's senior senator from Utah, also Republican) "warned Nov. 8 that any effort by Democrats to separate permanent tax cut extensions for the middle-class from permanent extensions of the top tax rates will fall flat in the Senate." BNA Daily Tax REalTime (Nov. 8, 2010, 7:14pm). It's the same old argument that failing to enact a new tax cut for the wealthiest Americans would press small businesses and hurt jobs, even though the "small businesses" affected are minuscule. Hatch sticks to the party line that any failure to pass a new tax cut bill for the wealthy is "a tax increase plain and simple that would be used to fund more Washington spending, while discouraging private sector job growth."

If we'd had stellar private sector job growth as a result of the enactment of the original 10-year Bush tax cuts, one might think Hatch's argument held some water. But job growth throughout the Bush regime was anemic--not really keeping up with population growth. So the argument doesn't have a leg to stand on.

How, pray tell, do people like Lee expect the government to service its current debt when they are against borrowing and against enacting a tax cut that fairly targets the middle class and poor for cuts while not cutting taxes for the rich, while simultaneously supporting drastic austerity measures like salary cutbacks and firings that will set the economy into a tailspin? How would communities cope with the unemployment caused by the proposed massive firings of, and cutbacks in salaries to, federal and state employees, based on the bogus claims that public employees are overpaid compared to private workers? When students need federal loans to continue at school, how will they get them with no employees to administer the program? When there is a disease outbreak or potential epidemic, how will it be handled if the Center for Disease Control has cut back its staff by 40%? The Republican answer seems to be --we'll see; no plan for now.

Now, we all recall the fact that the debt ceiling had to be increased numerous times during the Bush regime--in part because of the wars of choice in Afghanistan and Iraq and in part because of the more than one trillion-dollar ten year cost of the original 2001 Bush tax cuts. When the discussion of the Bush tax cuts took place in Congress, the Republicans said they would pay for themselves. They didn't and won't, as even staunchly partisan Republican economists admit. The GOP limited the tax cuts to ten years (with the gimmick of the 2010 sunset), however, in order to avoid admitting the real cost of the cuts. Now we are in 2010 and have to deal with it. There are choices to be made. It seems to me that following the Utah senators approach would cement the problematic economic pathway we adopted under Bush--benefits from stock market growth for the wealthiest, stagnation for the rest.

So do those Tea Party candidates who are supporting indiscriminate across-the board cuts to the federal budget of a size to

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Spending, Borrowing and Tax Cuts

As of course everyone is aware by now, many of the "Tea Party" candidates were elected to office last week, and many Republican officials have taken the resurgence of the party as an indication of support for what they view as the advocacy group's platform (shaped, in significant part, by funding from Dick Armey's group and the Koch brothers' agenda).

The result is that there is more talk about how to strangle "big government" while at the same time providing tax cuts to as many as possible. So Senator Elect Mike Lee of Utah, who won with Tea Party support, refuses to say what programs carried out by the federal government he thinks are bad, other than agreeing when PBS's Woodruff mentioned others' attacks on the federal Department of Education that we could get rid of that since (to paraphrase) education should be a matter for states and local governments. See the video of Woodruff's interview with Sen. elect Lee at the PBS website: Tea Party Sen.-Elect Vows Vote Against More Debt

One suspects that the reason education is easy to attack is that the Republicans-- since the Department's creation --have been attacking it, never with much specifics but always insisting that the problem is that it takes control away from local school districts. But what kinds of things does the Department do that are so bad? Looking at its website today, one finds several interesting items.

"Ready-to-learn" TV Grants--The department provided $27 million in three five-year grant awards to telecommunications entities-- Window to the World Communications, the Corporation for Public Broadcasting and the Hispanic Information and Telecommunications Network-- to support projects that "improve educational opportunities for young learners through innovative technology". The grant recipients will develop outreach materials and resources for families, preschool and early elementary teachers intended to improve literacy and math skills in children from 2 to 8 years old.

Federal student aid--The Department provides information and tools to help students find grants, student loans and scholarships, and to assist student counselors in helping students navigate the aid network. See, e.g., the portal for "Student Aid on the Web". How many students are able to attend college because of federal student aid who otherwise would not be able to go? In what way could states provide the same type of benefit, when students may well leave their own state to go elsewhere and states already are hard pressed to fund their own public universities (leaving most of them to scrounge for donor aid for 70% or more of their funding)?

Those are just a skim of the surface of the kinds of activities the Department undertakes. Yet Sen. Elect Mike Lee of Utah thinks we could just eliminate it. Wonder what real deliberation and investigation, if any, he is basing his opinion on.....

Lee also says that the government should make "across the board" cuts of up to 40% in order to prevent any further borrowing. He would like to cut federal salaries by 10% and fire federal workers. And he has indicated his willingness to join the renegade band of Republicans that have indicated they will not vote to increase the debt ceiling. These programs alone would likely launch us back into the Great Recession or in fact into a Great Depression. When citizen spending has stopped, government spending is what keeps the economy rolling. Especially beneficial is government spending that creates infrastructure that will support future job growth. But the kinds of cutbacks--and immediate limitation on borrowing--proposed here would be nothing short of disastrous.

Especially with the simultaneous push by Republicans to extend all of the Bush tax cuts, even to those wealthiest individuals who mostly save them (and invest them abroad) so that failing to extend new cuts to them will make not a whit of difference to the economy. Senator Orrin Hatch (Lee's senior senator from Utah, also Republican) "warned Nov. 8 that any effort by Democrats to separate permanent tax cut extensions for the middle-class from permanent extensions of the top tax rates will fall flat in the Senate." BNA Daily Tax REalTime (Nov. 8, 2010, 7:14pm). It's the same old argument that failing to enact a new tax cut for the wealthiest Americans would press small businesses and hurt jobs, even though the "small businesses" affected are minuscule. Hatch sticks to the party line that any failure to pass a new tax cut bill for the wealthy is "a tax increase plain and simple that would be used to fund more Washington spending, while discouraging private sector job growth."

If we'd had stellar private sector job growth as a result of the enactment of the original 10-year Bush tax cuts, one might think Hatch's argument held some water. But job growth throughout the Bush regime was anemic--not really keeping up with population growth. So the argument doesn't have a leg to stand on.

How, pray tell, do people like Lee expect the government to service its current debt when they are against borrowing and against enacting a tax cut that fairly targets the middle class and poor for cuts while not cutting taxes for the rich, while simultaneously supporting drastic austerity measures like salary cutbacks and firings that will set the economy into a tailspin? How would communities cope with the unemployment caused by the proposed massive firings of, and cutbacks in salaries to, federal and state employees, based on the bogus claims that public employees are overpaid compared to private workers? When students need federal loans to continue at school, how will they get them with no employees to administer the program? When there is a disease outbreak or potential epidemic, how will it be handled if the Center for Disease Control has cut back its staff by 40%? The Republican answer seems to be --we'll see; no plan for now.

Now, we all recall the fact that the debt ceiling had to be increased numerous times during the Bush regime--in part because of the wars of choice in Afghanistan and Iraq and in part because of the more than one trillion-dollar ten year cost of the original 2001 Bush tax cuts. When the discussion of the Bush tax cuts took place in Congress, the Republicans said they would pay for themselves. They didn't and won't, as even staunchly partisan Republican economists admit. The GOP limited the tax cuts to ten years (with the gimmick of the 2010 sunset), however, in order to avoid admitting the real cost of the cuts. Now we are in 2010 and have to deal with it. There are choices to be made. It seems to me that following the Utah senators approach would cement the problematic economic pathway we adopted under Bush--benefits from stock market growth for the wealthiest, stagnation for the rest.

So do those Tea Party candidates who are supporting indiscriminate across-the board cuts to the federal budget of a size to